Discouraged Workers and Other Marginally Attached People

Why These Categories Matter

A person can want a job and still not be counted as unemployed. In standard U.S. labor statistics, classification depends not only on whether someone has a job or wants one, but also on whether the person meets the criteria for being unemployed, including a recent active search for work. Someone who wants and is available for work but does not meet those criteria may be outside the labor force and classified as marginally attached.

That distinction changes both the reported labor-force count and the unemployment rate. It also explains why broader measures can include some people who are not in the official unemployed count. This topic is aligned with the SOA VEE Economics (Validation by Educational Experience) syllabus.

Definition: The labor force consists of employed people plus unemployed people. A person is generally classified as unemployed if the person has no job, is available for work, and has actively looked for work during the applicable recent search period. A standard exception applies to people on temporary layoff who are waiting to be recalled: they may be counted as unemployed without actively searching.

The active-search condition is an operational rule for measuring labor-market status. It does not mean that a person who is not counted as unemployed has no interest in working, or that the person’s circumstances are unimportant. It means that the person does not satisfy the specific criteria for the unemployed category.

Discouraged and Other Marginally Attached People

Marginally attached people are outside the labor force but have a stated connection to the labor market: they want a job, are available for work, and have looked for work within the broader qualifying period used by the measure, but not during the recent active-search period used to identify the unemployed. They are not included in the official unemployed count or the labor-force denominator.

Discouraged workers are a subset of marginally attached people. Their reason for not recently searching is related to their assessment of job prospects or their qualifications—for example, believing that no suitable jobs are available or that employers will not hire them. Other marginally attached people meet the marginal-attachment criteria but stopped searching for a different reason, such as family responsibilities or school. The reason distinguishes discouraged workers from other marginally attached people; it does not change their shared exclusion from the labor force.

Definition: Let \(E\) denote employed people, \(U\) unemployed people, and \(L=E+U\) the labor force. Let \(D\) denote discouraged workers and \(M\) all marginally attached people. Because discouraged workers are one part of the marginally attached group, \(D\) is included in \(M\), not added to it as a separate, nonoverlapping group.

The usual unemployment rate is \(U/L\). The broader U-4 measure adds discouraged workers to both the unemployed count and the labor-force denominator. U-5 adds all marginally attached people—including discouraged workers and other marginally attached people—to both. These additions are made to the numerator and denominator so that the resulting rate compares an expanded count of people seeking work with an expanded labor-force base.

Key formulas: The usual unemployment rate is \(U/L\). U-4 is \((U+D)/(L+D)\). U-5 is \((U+M)/(L+M)\), where \(M\) includes discouraged workers and other marginally attached people.

These measures are not obtained by simply adding marginally attached people to the unemployed count while leaving the denominator unchanged. Nor should discouraged workers be added a second time when calculating U-5: they are already included in \(M\).

Worked Example: Classifying People and Calculating Broader Rates

In a hypothetical labor-market survey, 800 people are employed and 40 are unemployed under the active-search definition. Another 12 people are discouraged workers, and 18 are other marginally attached people. Calculate the labor force, the usual unemployment rate, U-4, and U-5.

Method. First calculate the labor force from employed and unemployed people. Then add discouraged workers for U-4 and all marginally attached people for U-5.

The labor force is:

$$ L=E+U=800+40=840. $$

The usual unemployment rate is:

\frac{U}{L}=\frac{40}{840}=0.047619\ldots=4.7619\%.

For U-4, add the 12 discouraged workers to both counts:

U\text{-}4=\frac{U+D}{L+D} =\frac{40+12}{840+12} =\frac{52}{852} =0.061032\ldots =6.1032\%.

All marginally attached people total \(M=12+18=30\). For U-5, add all 30 to both counts:

U\text{-}5=\frac{U+M}{L+M} =\frac{40+30}{840+30} =\frac{70}{870} =0.080459\ldots =8.0459\%.

Check. U-5 exceeds U-4 here because the 18 other marginally attached people are included in U-5 but not U-4, and the expanded rate remains higher than the usual rate. The common mistake to avoid is using only the 12 discouraged workers in U-5; that would calculate U-4 again.

Why the Denominator Changes Too

The formulas follow from how the measures define their expanded populations. The usual labor force includes \(E\) and \(U\), so \(L=E+U\). If a measure also treats a specified group of people outside the labor force as part of its expanded labor-force base, that group must be added to the denominator. If the measure also counts that group as an expanded form of unemployment, it must be added to the numerator as well.

For U-4 the added group is \(D\); for U-5 it is \(M\). This produces the two formulas directly:

\begin{aligned} \text{U-4} &= \frac{\text{unemployed people plus discouraged workers}} {\text{labor force plus discouraged workers}} =\frac{U+D}{L+D},\\[4pt] \text{U-5} &= \frac{\text{unemployed people plus all marginally attached people}} {\text{labor force plus all marginally attached people}} =\frac{U+M}{L+M}. \end{aligned}

The denominator adjustment matters because a rate is a ratio, not merely an expanded count of people without jobs. Adding people only to the numerator would answer a different question: it would compare an expanded count with the original labor force. U-4 and U-5 instead use matching expanded groups in both parts of the ratio.

Establish the labor force.
Calculate \(L=E+U\), using only the employed and unemployed counts.

Identify the added group.
Use \(D\) for U-4. Use \(M\), the full marginally attached group, for U-5.

Add the same group to both parts.
Calculate \((U+D)/(L+D)\) or \((U+M)/(L+M)\), as appropriate.

Worked Example: Applying the Active-Search Criteria

A hypothetical survey records four people who do not currently have jobs. Alex is available and has actively searched recently. Blair wants a job, is available, searched within the broader qualifying period but not recently, and stopped because Blair believes no suitable jobs are available. Casey also wants and is available for work and searched within the broader qualifying period, but stopped recently because of school. Devon wants a job but is not available for work. Classify each person and identify which belong in \(U\), \(D\), and \(M\).

Alex. Alex has no job, is available, and has actively searched recently. Alex meets the unemployed definition, so Alex belongs in \(U\) and in the labor force.

Blair. Blair wants and is available for work, has a recent-enough connection through the broader search period, but has not searched during the recent active-search period. The reason—believing suitable jobs are unavailable—is job-market-related. Blair is a discouraged worker: Blair belongs in \(D\) and in \(M\), but not in \(U\) or \(L\).

Casey. Casey meets the stated marginal-attachment conditions, but the reason for stopping the recent search is school rather than discouragement about job prospects. Casey is other marginally attached: Casey belongs in \(M\), but not in \(D\), \(U\), or \(L\).

Devon. Devon is not available for work. Wanting a job alone is insufficient for either the unemployed or marginally attached category described here. Devon belongs in none of \(U\), \(D\), or \(M\), and is outside the labor force.

Check. Of these four people, one is unemployed, one is discouraged, one is other marginally attached, and one is not available. The common mistake is to classify everyone who wants a job as unemployed. The classification also requires the relevant availability and search conditions.

Worked Example: Avoiding the U-4 and U-5 Mix-Up

A hypothetical area has a labor force of 1,500, including 75 unemployed people. It also has 20 discouraged workers and 10 other marginally attached people. Calculate the usual unemployment rate, U-4, and U-5. Then identify the result of incorrectly using only discouraged workers in U-5.

The usual rate is:

\frac{U}{L}=\frac{75}{1500}=0.05=5.0000\%.

For U-4, add the 20 discouraged workers to both counts:

U\text{-}4=\frac{75+20}{1500+20} =\frac{95}{1520} =0.0625 =6.2500\%.

The total marginally attached group includes both categories:

M=D+\text{other marginally attached}=20+10=30.

Therefore:

U\text{-}5=\frac{75+30}{1500+30} =\frac{105}{1530} =0.068627\ldots =6.8627\%.

Wrong calculation. Using only discouraged workers gives \((75+20)/(1500+20)=6.2500\%\). That is U-4, not U-5. Correction. U-5 adds all 30 marginally attached people, including the 10 other marginally attached people, to both numerator and denominator. The U-5 calculation above is therefore 6.8627%.

Interpretation and Common Traps

A higher U-4 or U-5 rate than the usual unemployment rate indicates that including the specified groups raises the measured share in the expanded population who are unemployed or marginally attached. It does not mean those people meet the official unemployed definition. The measures preserve that distinction by naming the expanded group they add.

Do not equate wanting a job with being unemployed. The active-search and availability criteria matter, subject to the temporary-layoff exception.
Do not treat all marginally attached people as discouraged. Discouraged workers are a subset; other marginally attached people are included in \(M\) but not \(D\).
Do not confuse U-4 with U-5. U-4 adds discouraged workers specifically. U-5 adds all marginally attached people.
Do not add the numerator group without the denominator group. Each measure adds the same group to both parts of its ratio.
Do not count discouraged workers twice in U-5. They are already included in the total marginally attached count \(M\).

These categories provide useful distinctions, but a single rate cannot describe every dimension of labor-market difficulty. In particular, someone outside the labor force is not automatically marginally attached: the person must meet the relevant desire, availability, and search-history conditions. Correct interpretation starts with classification, then follows the stated numerator and denominator for the chosen measure.

Key takeaway: Active search generally separates unemployed people from marginally attached people. Discouraged workers are one subset of the marginally attached. U-4 adds discouraged workers to both counts; U-5 adds all marginally attached people to both counts.

Check Your Understanding

For each problem, classify the groups carefully before calculating.

A hypothetical region has 1,200 employed people and 60 unemployed people, plus 15 discouraged workers and 25 other marginally attached people. Calculate the usual unemployment rate, U-4, and U-5. (Answer: 4.7619%, 5.8824%, and 7.6923%, respectively.)
Two people have no jobs. One is available and actively searching; the other wants work, is available, searched during the broader qualifying period but not recently, and stopped because of family responsibilities. Classify each, and state whether the second person is discouraged or other marginally attached. (Answer: The first is unemployed; the second is other marginally attached, not discouraged.)
A hypothetical labor force is 2,100, with 90 unemployed people, 24 discouraged workers, and 16 other marginally attached people. Calculate U-5 and state which group is added to its numerator and denominator. (Answer: \(130/2,140=6.0748\%\); all 40 marginally attached people are added.)
An analyst calculates U-5 as \((48+12)/(1,050+12)\), where 12 is the discouraged count and there are also 9 other marginally attached people. Identify the measure calculated and give the correct U-5 rate. (Answer: The displayed calculation is U-4; U-5 is \((48+21)/(1,050+21)=69/1,071=6.4426\%\).)
A survey reports 30 unemployed people in a labor force of 600, along with 10 discouraged and 5 other marginally attached people. Calculate the usual rate and both expanded rates, then explain why U-5 exceeds U-4. (Answer: The usual rate is 5.0000%, U-4 is \(40/610=6.5574\%\), and U-5 is \(45/615=7.3171\%\); U-5 includes the five other marginally attached people as well as the discouraged workers.)

What You'll Learn